Consumer and environmental groups identify investor-to-state dispute settlement (ISDS) as the most important threat in upcoming EU trade agreements. Investor-to-state dispute settlement gives multinationals the possibility to sue states for special tribunals if changes in law may lead to lower profits than expected. This threatens environmental policies, access to medicines and the public interest. ISDS undermines democracy and may hamper copyright and patent law reform.

Who

In 2012 Europeans massively protested against the Anti-Counterfeiting Trade Agreement (ACTA). ACTA threatened privacy, freedom of speech and access to medicine. ACTA could have made copyright and patent law reform impossible. In July 2012, the European Parliament overwhelmingly rejected ACTA. We now have to watch out for the return of ACTA-like provisions in other international agreements. But this is not the only threat we face. Investor-to-state dispute settlement is much less well known among digital activists, but it is just as threatening. I want to make the digital community aware of ISDS.

What

A lightning talk, just 5 minutes, an introduction on ISDS. A link to further reading. An invitation to discuss the issue further at the Noisy Square village at OHM.

How

In the presentation, I will have to explain a few things. What is ISDS: special rules and special tribunals. Special rules: International agreements give extra protection to foreign investors against expropriation. Over time, the scope of protection got broader and broader, from expropriation of a factory, to law changes that may make profits lower. Special tribunals: The tribunals consist of three lawyers. These tribunals fall outside the court system, are placed above the supreme courts of countries.

There are major problems: the ISDS system is ridden with conflicts of interest. Lawyers write investment plans for multinationals one day, and the next day they are “judges” in ISDS tribunals. I will give examples showing that multinationals can use ISDS to attack laws and decisions they do not like. The number of cases is rising sharply.

This moment in history: EU member states signed many bilateral investment treaties, but since the Lisbon Treaty, the EU is competent. From now on, the European Commission negotiates, the European Parliament has a veto. The parliament is critical about ISDS. Now is the time to get it right.

A major development, a game changer: the EU and US are going to negotiate a trade agreement, they want to create a single market. The European Commission wants ISDS in the trade agreement – while both the EU and US already have excellent protection against expropriation, and both have well respected courts. There are enormous EU < -> US investments, the scale of ISDS cases may be equally enormous.

This is a time not to be naive: the European Commission is aware of problems and wants to introduce safeguards. But specialized “courts” attract and create captive in-crowds. See the European Patent Office boards, or the US Court of Appeals for the Federal Circuit. Captive in-crowds can always find ways to route around safeguards. See for instance what the European Patent Office did with the exclusion of software patents.

There is only one real safeguard: exclusion of ISDS.

In societies based on the rule of law, strong institutions are essential. Captive institutions undermine democracy, the rule of law and the public interest.

Today the European Parliament adopted a non-binding resolution on the trade agreement with the United States (TTIP). Based on this resolution we could have a discriminating and expansive investor-to-state dispute settlement (ISDS) system, rigged to the advantage of the United States.

Martin Schulz, the president of the European Parliament proposed a compromise amendment on investor-to-state dispute settlement (ISDS). [1]
The amendment calls on the EU commission to replace ISDS with ISDS: "to replace the ISDS-system with a new system for resolving disputes between investors and states".

The French government published a proposal for investor-to-state dispute settlement (ISDS) reforms: Towards a new way to settle disputes between states and investors, May 2015. (pdf, French: Le Monde)
Summary
The French proposal would grant for-profit arbitrators, working in a system that creates perverse incentives, vast discretionary powers.

Last week the European Parliament postponed the vote on a resolution on the EU-US trade agreement (TTIP). The vote was postponed because many social democratic members oppose investor-to-state dispute settlement (ISDS).

Wednesday the European Parliament will vote on a resolution on TTIP, the agreement with the US under negotiation. The EU commission wants to add investor-to-state dispute settlement, or ISDS, to this agreement.

Social democratic ministers from six EU countries published reform proposals for the highly controversial investor-to-state dispute settlement (ISDS) mechanism. ISDS gives foreign investors the right to bypass local courts and use international arbitration to fight out conflicts with states.

EU Trade Commissioner Malmström addressed a question from MEP Adam Gierek on TTIP effects on transatlantic patentability differences. The Commissioner did not actually answer the question of the Polish social democrat and responded with routine information: "Notwithstanding patent protection granted by US law to computer programs, our current international obligations ensure copyright protection in both parties."

Wikileaks has released the "Investment Chapter" from the secret negotiations of the TPP (Trans-Pacific Partnership) agreement. It contains the highly controversial investor-to-state dispute settlement mechanism (ISDS), which makes it possible for multinational to sue states for international tribunals.

The European Commission investigates a permanent international investment court as a replacement of the controversial investor-to-state dispute settlement mechanism (ISDS). The plan for a court and the road map towards it are fundamentally flawed.

Today EU commissioner Malmström gave a speech in the European Parliament trade committee on investor-to-state dispute settlement (ISDS). ISDS gives foreign investors the right to use arbitration against states, instead of using local courts.

Today the EU declassified a two year old mandate of the member states to the European Commission to negotiate the services agreement TiSA. These mandates are drafted by the European Commission and approved by the member states in the European Council and authorise the European Commission to negotiate with third countries.

A Vrijschrift letter to the Dutch Parliament highlights the dangers of investor-to-state dispute settlement (ISDS) in the trade agreements with Canada (CETA) and Singapore (EUSFTA). On 25 March EU trade ministers will meet (informally) to discuss trade agreements and ISDS.

The European Commission acknowledges that the unitary patent is not safeguarded against the granting of software patents by endorsing the EPO teaching:
21. Will the new unitary patent regime facilitate the patenting of computer programmes?

United States Senator Elizabeth Warren turned against investor-to-state dispute settlement (ISDS): "Why create these rigged, pseudo-courts at all?" Jeff Zients, director of the National Economic Council, posted a response to Warren on the White House website.

Since 1 January 2015 online traders in the EU, selling items like "laser swords" in an app, have to apply the applicable value-added tax (VAT) rate to their purchases and submit the tax to the applicable tax authority of the responsible European member state. The new rules affect "laser swords", document templates and SaaS but not traditional ecommerce trade of physical goods.

The European Commission published a textual proposal for the TTIP talks that includes the H-Word. Previously the European Commission had argued that (legal) harmonisation was not among the objective of the agreement: "Given the efficiency of their respective systems, the intention is not to strive towards harmonisation, but to identify a number of specific issues where divergences will be addressed."

Eva Kaili (S&D) from Greece asks the European Commission (under rule 130):
The Transatlantic Trade and Investment Partnership and potential areas of conflict with the Lisbon Treaty
The Transatlantic Trade and Investment Partnership (hereinafter TTIP) is a comprehensive free trade and investment agreement, which is currently being negotiated — behind closed doors — between the European Union and the US. In particular, all TTIP negotiations are swathed in secrecy, since the Commission is imposing the most stringent restrictions on the more important documents.

The European People's Party (EPP), the biggest group in the European Parliament, is in favour of investor-to-state dispute settlement (ISDS). I will discuss their position and conclude it creates three risks.

In October 2014 the European Commission published the draft text of the EU-Singapore trade agreement (EUSFTA) investment chapter. It contains investment protection rules for foreign investors and the controversial investor-state dispute settlement (ISDS), which gives foreign investors special rights in conflicts with governments.

Marietje Schaake, the European Parliament's liberal group's (ALDE) spokesperson on the trade agreement with the US (TTIP) published a blog on investor-state arbitration (ISDS). I will discuss her arguments below; to avoid cherry picking, I will quote her whole blog (for the links and images see her blog).

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About

The FFII is a global network of associations dedicated to information about free and competitive software markets, genuine open standards and patent systems with lesser barriers to competition. The FFII contributions enabled the rejection of the EU software patent directive in July 2005, working closely with the European Parliament and many partners from industry and civil society. CNET awarded the FFII the Outstanding contribution to software development prize for this work. FFII continues to defend your right to a free and competitive software market and informational freedom.